Understanding Loss Set-Off or carry forward and set-off of losses in Clause 108 of the Income Tax Bill, 2025 Vs. Section 70 of the Income Tax Act, 1961

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ncome Tax Bill, 2025, addresses the set-off of losses under the same head of income. This provision forms part of Chapter VII of the Bill, which deals with the set-off or carry forward and set-off of losses. The clause is significant in the context of income tax legislation as it provides clarity and structure for taxpayers on how to manage losses incurred from different sources under the same hea .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... s are common. Detailed Analysis Clause 108 is divided into two primary subsections: 1. Subsection (1): This subsection allows the assessee to set off a loss from any source under any head of income, other than capital gains, against income from any other source under the same head for that tax year. This provision aligns with the principle of net income taxation, ensuring that only the net inco .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ds associated with these asset classes. This segregation ensures that taxpayers cannot exploit tax benefits by offsetting long-term capital losses against short-term capital gains, which may be subject to different tax rates. Practical Implications Clause 108 has significant implications for taxpayers, particularly those with diversified income portfolios. The provision requires taxpayers to mai .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ion 70(1) allow for the set-off of losses from one source against income from another source under the same head, excluding capital gains. This consistency reflects a stable policy approach to handling losses across different tax regimes. 2. Capital Gains Treatment: The treatment of capital gains in Clause 108(2) is more refined compared to Section 70. While Section 70 separates short-term and ot .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 2025, represents a significant evolution in the legislative framework governing the set-off of losses under the same head of income. By providing clear guidelines and distinctions, particularly in relation to capital assets, the provision enhances the clarity and predictability of tax outcomes for taxpayers. As tax laws continue to evolve, Clause 108 may serve as a model for future legislative re .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X